Secrets of the e-commerce stars
(IDG) -- The National Enquirer and Hard Copy spend millions trying to unearth secrets of the Hollywood stars. We at Network World turned our attention, but fortunately not our wallets, towards the high profile world of electronic commerce.
While Julia Roberts' lovelife may not improve your job, the secrets revealed by our industry's biggest e-comm stars can help your company make more money. Who knows? If you apply these lessons right, maybe someday you'll be an e-comm star, too.
Internet Entertainment Group: Try anything
Hop onto Seth Warshavsky' popular pornography site, and you'll soon be hit with an in-your-face Web advertisement for Viagra, which will pursue you from page to page with a lust of its own.
Viagra? "Yes, we're selling Viagra online," acknowledges Warshavsky, the twentysomething bad boy of porn, whose big-busted empire, the Internet Entertainment Group (IEG), is making money hand over fist.
Warshavsky thinks Viagra, the cure for male impotence, is an obvious cross-sell for porn, and why not? Now you can buy this prescription medicine online through another Web business, IEG Medical Services.
For Warshavsky, president and CEO of IEG, the secret to success is to try anything. Move aggressively to fortify your brand and use the latest Web technologies to deliver the most, well, stimulating experience.
After all, catering to mankind's baser instincts isn't as easy as it sounds. Internet porn has become a tough, competitive business. But by trying every publicity gimmick possible -- from acquiring the sex video of Pamela Anderson and Tommy Lee to distributing nude photos of Dr. Laura Schlesinger -- IEG has turned its main Web site, clublove.com, into a money machine.
Responsible for most of IEG's $15 million profit last year, clublove.com takes in the bulk of its revenue from subscribers paying $24.95 per month for the pleasure of trolling a mind-boggling multiplex of sex.
Milking the clublove.com cash cow, the restless Warshavsky has diversified into gambling at goldenoasis.com; psychic advice at psychic.com; real-estate investment at zerodown.com; a place to watch surgery online at surgeryonline.com; and naturemed.com, which sells herbal remedies.
Whether IEG ventures will pan out in the long run is unclear, but Warshavsky is clearly a believer in the idea that you don't know until you try. Uncommonly savvy about networks and software, he also moves aggressively to deploy technology to boost his business.
For instance, IEG developed its own fraud-control database to weed out bad credit cards. It developed its own "push" video and broadcast technology to blast out pictures of women and allow enraptured viewers to engage in an interactive relationship -- without having to download a plug-in. "The important thing is ease of use for the end user," Warshavsky advises.
The IEG CEO's main goal this spring is to take the company public in an initial public offering, and he dismisses any of the gossip that says the big Wall St. investment firms won't put their bucks into a Web porn site.
eBay: Know your customer
At eBay the secret to success is: Know your customer. And what a success it has been. This online person-to-person auction house handles an astounding 400,000 auctions per day, selling everything from dolls to cars.
To understand the eBay auction bidder, who registers by name and typically spends 1 1/2 hours online there each month, eBay looks back. The company regularly reviews the history of its online transactions since the company was launched over three years ago.
"We have all the data from the beginning of time, and we use it extensively for analysis purposes," says Michael Wilson, eBay's senior vice president of engineering, who oversees the technical operations at the auction house.
Based on this analysis of user demand, eBay makes changes in its auction services. For instance, when eBay noticed that growing numbers of bidders hailed from Japan and Australia, it decided to launch versions of its auction service in those areas. And with people registered in over 90 countries, eBay realized early on that it had to provide a central repository of international tariffs, customs and regulations.
Customer analysis also changes the product mix, with eBay adding new categories as interest in different types of collectibles grows. The number of categories is now up to 1,000.
Although eBay's auction enthusiasts appear at first glance to be on the cutting edge, they are actually unsophisticated in terms of the technology itself, Wilson says. Therefore, eBay's Web site is kept simple, so that even the least 'Net-savvy individual can just jump in and use it.
"We don't set a cookie, because our users don't understand them," Wilson notes, adding, "Besides, it feels icky to track people about what they're doing." And because eBay's online bidders are not keen on banner ads unrelated to the auctions, eBay rejects commercial advertising.
All of this doesn't mean eBay runs an unsophisticated back-room operation. According to Wilson, eBay has "overbuilt" by installing four Sun Starfire servers "so we can take 50% more traffic than we receive." And a technical staff of 72 is needed to keep all those auctions going.
Travelocity: Keep it simple
In the high-flying market for online travel sales, it has been a close race between Travelocity and Expedia, both launched three years ago.
With revenue last year of $285 million, Travelocity, a subsidiary of The Sabre Group Holdings, just managed to edge out Expedia, a Microsoft venture. Expedia, however, claims its current run rate is higher than Travelocity's.
According to Travelocity's top executive, Terrell Jones, the secret to success has been focusing on ease of use for online buyers.
"What we found is, the faster the site works, the shorter the path, the more people purchase," says Jones, who is senior vice president of Sabre Interactive and chief information officer at The Sabre Group. "When Travelocity first went live, it took the online buyer a total of 13 screens to make a booking. Now, that's been reduced to just three," he says.
The Sabre Group also produces the Sabre electronic booking system widely used by travel agents and airlines. Travelocity, also based on Sabre, confronts the problem of cutting out the travel agent by giving agents commissions if online buyers opt to have their tickets issued through the agents. In addition, Travelocity is putting up Web sites for travel agents. "We've built 12,000 Web sites for our agents," Jones says. "Most are simple, but some are complicated, such as cheaptickets.com."
With its competitor Expedia emphasizing low-cost fares, Travelocity recently struck back with a new Web feature called "Best Fare Finder." This feature tells customers when a ticket will be less expensive if they're willing to fly at a different day or time.
Expedia is overtaking Travelocity right now, claims Simon Breakwell, Expedia's group manager for the travel business unit, noting Expedia is now doing $15 million in bookings per week, vs. Travelocity's $11 million.
Breakwell, too, says the secret to success has been focusing on the Web site's ease of use.
But for Expedia, the problem has been to come up with the right mix of travel information content.
In the past, travel buyers at expedia.com could barely find their way past the exotic travel descriptions of Tahiti or the Andes and get to a place where they could actually buy tickets.
"In the early days, we spent a lot of time thinking about Expedia as a place to find out about the world," Breakwell says. "We were content-rich, but we made it hard for customers to find out how to buy a ticket."
Now, Expedia makes sure you can purchase travel tickets directly off the home page instead of searching for a screen buried underneath content.
Cisco: Integrate ERP
By now nearly everyone has heard Cisco's amazing electronic commerce success story. The hardware heavyweight now gets 75% of its total equipment orders through its Web site; that's 2,000 purchase orders for a total of $23 million worth of business each day.
The secret of Cisco's success, according to Todd Elizalde, the firm's director of Internet commerce, is making sure Web-based ordering is smoothly integrated into back-end enterprise resource planning (ERP) systems.
"This is one of the crown jewels of our system," Elizalde says. "By connecting the Web and the ERP system, the customer can submit an order and 15 minutes later pull up the status."
When the company began using the Web for business transactions almost three years ago, Cisco hooked cisco.com into its in-house Oracle ERP system. From the beginning, every order went directly into the order-management process without having to be keyed in again.
This not only saves considerable time, it also promotes the accuracy of the order.
Accuracy is also safeguarded by the Web site's "configuration engine," based on a product from Internet Commerce Connection. The engine looks over the order to spot commonly found errors.
The Web engine automatically checks customer account information and purchase details against a database of technical information. For example, if a part number is wrong, the engine will flag it. And the engine won't let you order a version of software that is inappropriate for your hardware.
This process "makes it almost impossible to submit a wrong configuration," Elizalde claims. In contrast, with faxed orders, one-third of the time Cisco has to call the customer back to discuss an error.
The ERP hooks are a boon to Cisco's largest reseller partners, who want to have the order information entered directly into their own ERP systems at the same time they send it to Cisco.
Dell: Customizing for users
Dell might not sell 75% of its gear over the Internet like Cisco does, but it moves quite a bit of merchandise. Dell does $14 million per day in direct sales of 30,000 products, and the Web now accounts for 25% of the company's total business. The rest is mostly done over the phone.
But Dell doesn't have one monolithic Web site. Instead there are three separate Web sites serving different lines of business and different constituencies.
According to Richard Owen, vice president of marketing at Dell Online Worldwide, having a different Web strategy for each customer base is the secret to keeping the firm's online business on track.
"Dell is a company that continues to grow rapidly, and the Web is intrinsic to our growth," he says, adding that "70% of our sales are to business, 30% are to consumers."
For consumers and small businesses, Dell has a Web site, dell.com, where the public can place orders via a credit card.
For 15,000 larger corporate customers, there is a password-based extranet Web server called Premium Pages. Ford Motor Co. and Boeing are Premium Pages customers.
"The specific prices [on Premium Pages] are the ones that your company has negotiated," Owen says.
To place an order on the Premium Pages site, a customer logs into Dell's own intranet in Austin, Texas, or other data centers around the world, including facilities in Ireland and Tokyo.
Dell's third Web site, called gigabuys.com, was launched last month to sell software and peripherals to both consumers and business customers. The content on gigabuys.com will probably be folded into Premium Pages, Owen says.
Promoting its public Web sites means spending a lot of money on advertising, and Dell does that through traditional means, such as print and television, as well as Web advertising. Banner ads on the Web don't seem to be too effective, Owen comments.
Just last month Dell took a different approach to advertising through what it calls its affiliate program. In this program, other Web sites sign up to drive traffic to Dell, which will pay a commission for the actual business generated in this way. Amazon.com is one of the first affiliates Dell has signed up.
Disney: Manage centrally
Entertainment colossus Walt Disney Co. is proving that an old-line, established business can successfully adapt to the Web. In Disney's case, the secret to success has been centralizing management over a far-flung Internet empire.
Disney jumped enthusiastically onto the Web more than three years ago with Disney. com, followed soon after by ESPN.com and ABCnews.com. While these did fairly well as stand-alone sites, Disney saw them as being too isolated.
These days, the three flagship Web sites are managed under an entirely new unit set up a year and a half ago called the Buena Vista Internet Group. Buena Vista directed Starwave, the Web technology company it bought, to centrally coordinate content for the flagship Disney sites.
And Buena Vista this January launched the GO Network (www.go.com) as Disney's own Internet portal, the door to all the Disney Web sites -- as well as a pointer to new content not traditionally associated with Disney, such as financial services.
So far, the strategy seems to be working, says Geoff Riess, senior vice president of programming and development at ESPN Internet Ventures.
"Disney's acquisition of Starwave gave us a stronger technology edge and electronic commerce expertise," Riess claims.
Starwave, for example, helps make sure that Web visitors will see sports merchandise linked to the leading sports stories of the day. "We've learned a lot over the last six months to increase the numbers of items we're selling," Riess says.
Starwave takes care of database management for all of Disney's Web ventures and can centrally coordinate the promotion of events across them all. Though building a Web presence is tough, Disney Online, a site for children and their families, now has 190,000 paying subscribers and gets 900,000 visits per day. The online Disney store each day sells as much as eight of the brick-and-mortar Disney stores. Even Donald Duck wouldn't complain about that.
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